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Glencore shares rally after ‘flash crash’

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World Coal,

Glencore’s shares have rebounded following their crash to record lows on Monday 28 September. The company’s shares briefly fell to 66.67p before closing at just over 70p in a day being dubbed as Glencore’s ‘flash crash’ after analysts at Investec, an investment bank, questioned the value of the firm weighed down by US$30 billion in debt in an era of low commodity prices.

Shares closed at 91.5p on Wednesday 30 September before climbing higher in early morning trading on Thursday – recouping all of the losses experienced on Monday.

"The market got scared," John Meyer, a mining analyst at broker SP Angel Corporate Finance, told the Australian Financial Review. "It was […] based on momentum rather than reality. I think Glencore's stock will continue to climb."

Glencore had issued a combative statement in response to the crash in share price saying that was taking “proactive steps to position […] to withstand current commodity market conditions. Our business remains operationally and financially robust – we have positive cash flow, good liquidity and absolutely no solvency issues."

Among the measures announced to help reduce its debt, the company said it would suspend its dividend for 18 months and sell assets in addition to the US$2.5 billion share sale held in mid-September.

Despite the rally in share price, the company has still lost more than two-thirds of its value since May when its share price peaked at just over 314p. Tumbling commodity prices on the back of weaker-than-expected demand from China and strong production levels of key commodities – such as thermal coal (of which Glencore is the largest exporter), crude oil, iron ore and copper – have left the company worth a fraction of its 2014 all-time-high market capitalisation of US$85 billion.

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